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Facing Poverty - Income Inequality in Africa

Facing Poverty - Income Inequality in Africa

According to the recently published study of the United Nations Development Programme’s (UNDP) on Income Inequality Trends in sub-Saharan Africa: Divergence, Determinants, and Consequences, poverty levels remain very high in Africa -41 percent in comparison to other regions under development

What the study outlines is the fact that despite sub-Saharan Africa’s (SSA) achievement on an average reduction in its unweighted Gini coefficient- from about 0.47 to 0.43 between 1991 and 2011- the region remains globally on the top between the most unequal ones. Although solid economic progress over the last 25 years was noted, illustrated by robust GDP growth of about 5.0 percent, there is still a long way to go, as still 10 of its counties are included among the 19 most unequal in the world.  

What contributes to this situation is first of all Africa’s highly dualistic economic structure. The capacity of high income sectors (such as multinational companies and the extractive sector) to generate employment, is rather limited, while the informal sector, where most of the workforce earns far lower incomes, is in much greater demand. What also plays a role is high concentration of physical capital, human capital, and land, especially in Eastern and Southern Africa; and the limited distributive capacity of the State, which often manifests in a ‘natural resource curse’, an urban bias of public policy, and ethnic and gender inequalities.

Based on an Integrated Inequality Dataset for sub-Saharan Africa (IID-SSA) the study focuses on how dynamic and complex the theme of income inequality is by showing that due to that seven outlier countries (South Africa, Botswana, Namibia, Zambia, Central African Republic, Comoros and Lesotho), where wealth is being concentrated only in a very restricted amount of people, the continent is being lead to the highest globally inequality rates.

But again, Burkina Faso, Mali, Niger, Burundi, Guinea, seem to be performing better and rank among the most equal worldwide. What characterize these countries are the communal land ownership and egalitarian access to land, features which accelerate use of land for productive engagement, especially in agriculture.

Underscoring the timeliness of the study UNDP Regional Director for Africa said: “The book helps to crystalize the indivisibility of the SDGs and the centrality of addressing low income inequality in accelerating the achievement of the 2030 Agenda for Sustainable Development and in helping operationalize SDG 10 in Africa”.

Warning that there is no one-size-fits-all approach to addressing income disparities in the region, the authors of the book recommend a series of target policy approaches aimed at:

▪ Improving distribution of human capital (particularly secondary education) to positively affect inequality;

▪ Increasing direct taxation and efficiency of tax administration, as well as increasing well-targeted social expenditures;

▪ Enhancing productivity in the agricultural sector, which is seen as key to reallocating labour to other sectors of the economy and reducing rural poverty, rural poverty gaps, and income inequality;

▪ implementing structural transformation.

“The key message is that there is no silver bullet for addressing inequality in the continent. You have to take cities’ context into consideration and realize that policies that accelerate the reduction of poverty may not necessarily be the same policy that reduces inequality.” said Ayodele Odusola, Head of Strategy and Analysis and Chief Economist for UNDP Africa, and lead editor of the study.

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